India's headline inflation slipped to a more than two-year low last month, official data showed on Tuesday, giving the central bank scope to cut interest rates to counter weakening economic growth.
The Wholesale Price Index (WPI) fell to 6.55 percent in January from a year earlier, the lowest in 26 months, thanks mainly to falling prices of food and vegetables.
The figure, which marked a decline from December's inflation rate of 7.47 percent, reinforced hopes that inflation was on a downward trend.
The number was broadly in line with market expectations, but was still above the central bank's comfort level of around five percent.
Inflation was nudging double-digits for most of 2011 before easing in December, fuelled by surging food prices which heaped misery on India's hundreds of millions of poor and created huge difficulties for the government.
The Reserve Bank of India has raised interest rates 13 times since March 2010 in a bid to bring down inflation, putting a dampener on industrial activity and slowing economic growth.
The bank has said interest rates now have peaked and that it has shifted its focus towards promoting growth, while ensuring that inflationary pressures "remain contained."
Analysts expect the first interest rate cuts to come in April or March.
Economic growth in India has slowed sharply and is expected to be around 6.9 percent for the current financial year to March, according to the government, a low figure by recent Indian standards.
Source: AFP Asian Edition